Do Kwon, the founder of blockchain company Terraform Labs, was handed a 15-year jail term on Thursday for his involvement in the collapse of cryptoassets Luna and UST, which resulted in a $40 billion loss three years ago.
Judge’s Verdict
When delivering his verdict, US Judge Paul Engelmayer said Kwon chose to lie to investors on X, formerly Twitter, giving them fake assurances that their money was safe. At one point, the 33-year-old fallen crypto guru urged his X followers to deploy more capital in Luna and UST, a move that would later lead to significant losses.
One Ukrainian man who was affected by Kwon’s crypto empire crash appeared before Engelmayer and narrated his ordeal. He said the affirmations made by the accused gave him confidence to invest his 17-year savings of $200,000 in UST to earn the promised 20% annual yield. However, the UST stablecoin depegged a few weeks later, with the victim losing over 70% of their capital.
Prosecutors vs. Kwon’s Attorneys
Before the judgment, US prosecutors and Kwon’s lawyers disagreed on the jail term to be served by the accused. The former asked the court to hand down a 12-year prison sentence, arguing that Kwon built his crypto empire purely through deceptive and manipulative techniques to gain investors’ trust. Meanwhile, his attorneys requested that Judge Engelmayer limit the jail sentence to five years, claiming that he had already spent some time behind bars.
“I’m Responsible for the Terra Collapse,” Kwon Tells the Court
Throughout his case, Kwon didn’t attempt to prove his innocence. Instead, he admitted that he failed to run his projects properly, leading to widespread pain. UST, for instance, wasn’t backed by real assets like other stablecoins such as USDT and USDC. Instead, it operated on an algorithmic system to keep its price at $1, but it failed eventually.
All told, the US court has agreed to Kwon’s request to serve the final seven years of his jail term in his home country, South Korea. Interestingly, prosecutors back home are preparing to file a fraud case against Kwon, with a potential jail sentence of up to 40 years.
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